In a recent article by IBD about the attractiveness of foreign stocks, Dennis Stattman (a manager of the $60 billion BlackRock Global Allocation — ticker: MDLOX), commented that there is a lot to like in Japan. Dennis cited upward earnings revisions; corporate managers starting shareholder-friendly policies; and attractive valuations. He believes Japan is in the very early stages of a multi-year bull market.
I agree with Dennis. There is a lot I like about Japan. For anyone that has visited Japan in the past decade or so, you might agree that if you were to blindfold someone (and place them at the ubiquitous central train station of even a modest Japanese city) that had been reading Mauldin and Bass or any of their cheerleaders trying to cash in on any variety of Japan blowup, they would probably be shocked to find such a well functioning economy. Quality of life has improved demonstrably in the past decade. The global macro and geopolitical backdrop is undeniably challenging, making Japan’s domestic challenges doubly so, but for this value investor there continue to be excellent investments featuring companies with quality management, generating solid returns on capital.
It will be interesting to see what Japan positions, if any, of BlackRock Global Allocation crack its top-25 holdings (representing approximately a 0.5% position, or around $600M investment, in its portfolio). As of May 31st (most recent information available), there are no Japanese stocks among its top-25, though the fund had 9.4% of its assets in Japanese equities (it is maintaining its over-weight position vs. a benchmark weight for Japan of 3.9%). Top-10 stock holdings include Apple and P&G both at 0.9%, Visa at 0.8%, Wells Fargo, Siemens, and Roche each at 0.7%, and Comcast, Mastercard, Nestle, and Safran at 0.6%.
BlackRock has been buying Japanese stocks, though what fund specifically is not readily known. Below are some of the recent 5%+ positions BlackRock Japan has disclosed. Besides Net One Systems, mobcast, and Tohto Suisan, they are all companies with billion to several billion dollar (equivalent) market caps. Some, such as JSR, Nabtesco, and JGC are not unfamiliar names to Western institutional investor portfolios.
- DeNA (TYO: 2432) 6.01% (new) disclosed 7/4 — mobile/social games and media
- JSR (TYO: 4185) 6.34% (+1.06%) disclosed 6/19 — synthetic rubber and resin products
- Nabtesco (TYO: 6268) 6.48% (+1.39%) disclosed 6/19 — industrial robots/machinery, vehicle break systems and automatic doors
- JGC Corp (TYO: 1963) 6.66% (+1.06%) disclosed 6/19 — integrated engineering: petro/petrochem, nat gas
- NKSJ Holdings (TYO: 8630) 5.01% (new) disclosed 7/4 — top-3 insurance underwriter, nonlife
- Yamaha Motor (TYO: 7272) 6.27% (+1.26%) disclosed 7/4
- Net One Systems (TYO: 7518) 8.65% (+1.35%) disclosed 7/4 — telecom/wireless network integration
- Rinnai (TYO: 5947) 4.99% (new) disclosed 6/19 — heating appliances and components (kitchen; water heaters; laundry)
- Ship Healthcare (TYO: 3360) 5.07% (new) disclosed 6/19 — medical products/supplies; pharmacies
- mobcast (TYO-MOTHERS: 3664) 2.68% (-3.09%) disclosed 7/4 — social media/games-sports
- Tohto Suisan (TYO: 8038) 6.37% (-1.05%) disclosed 6/19 — wholesale seafood; refrigerated warehousing; real estate leasing